Turkish Central Bank Slashes Lending Rate For Third Time

11/20/2012 7:31 AM ET

Turkey's central bank on Tuesday lowered its overnight lending rate for the third consecutive time, while holding the borrowing rate and the benchmark repo rate, in order to prop up the economy after growth weakened further.

The central bank reduced its overnight lending rate, which is the upper end of the interest-rate corridor, by half a percent to 9 percent. The latest cut followed a a similar reduction at the previous rate-setting and a 150 basis point cut earlier, which was the first revision in seven months.

The monetary policy committee headed by governor Erdem Basci also maintained the one-week repo rate at record-low 5.75 percent and the overnight borrowing rate at 5 percent, in line with economists' expectations.

The central bank last month raised its inflation forecast for this year to 7.4 percent from 6.2 percent and 2013 inflation forecast to 5.3 percent from 5.1 percent. The bank said that the volatility in unprocessed food prices continues to pose uncertainty regarding the short-term forecast.

Turkey's annual inflation weakened to 7.8 percent in October from 9.19 percent in September, but remained well above the target.

The economy expanded at a slower pace of 2.9 percent year-on-year in the second quarter than 3.3 percent in the first quarter. The latest expansion was the slowest since 2009.